Mexico Ready To Back Higher Junk Food Tax

Mexico's ruling Institutional Revolutionary Party
(PRI) is ready to support an opposition proposal to increase a planned
tax on junk food included in the government's fiscal reform.

Last week, the lower house of Congress approved President Enrique Pena Nieto's fiscal reform, at the last minute adding a measure to impose a 5pc tax on junk food.

The Senate
must approve the reform by the end of the month. This week Armando Rios
Piter, a Senate finance expert from the leftist Party of the Democratic
Revolution (PRD), proposed increasing the tax rate on junk food to 8pc.

Asked
whether the PRI could back the higher tax proposed by Rios Piter, which
also aims to reduce high levels of obesity in Mexico, the party's
Senate leader Emilio Gamboa told Reuters: "The PRI will undoubtedly
support it."

Gamboa noted the finance committee of the Senate was
still discussing the fiscal reform, and its decision on possible changes
to the bill is not expected until later this week.

The tax bill
is a key plank of a government reform agenda spanning energy to
telecommunications that Pena Nieto hopes will boost growth in Latin America's No.2 economy.

Any
changes to the bill would mean returning it to the lower house of
Congress to be signed off, and would expose it to fresh attacks from the
conservative National Action Party (PAN), which has waged a vigorous
campaign against much of the tax reform.

If the bill is approved
as revised by the lower house, government tax revenues will rise by a
little less than 2.7pc of GDP by 2018, Miguel Messmacher, Mexico's
deputy finance minister for revenue, told Milenio television.

That is slightly less than the nearly 2.8pc of GDP forecast previously by Finance Minister Luis Videgaray.

More
fighting over the tax bill risks complicating Pena Nieto's efforts to
open up the oil industry to private capital, for which the PRI is likely
to rely on support from the PAN.

The PRI lacks a majority in
Congress and needs a two-thirds majority for the constitutional changes
Pena Nieto wants to make to foment outside investment in the state-run
oil industry.

DEFINING JUNK FOOD

Separately,
another PRI official, speaking on condition of anonymity, said the
Senate was also considering expanding the basket of foods included under
the junk food definition so as to reap more tax without necessarily
raising the rate.

The junk food tax, which compliments a
planned charge on sugary drinks, is to be levied on high-calorie foods
including chocolates, sweets, puddings, potato chips and ice cream. The
definition does not, however, include hamburgers and tacos.

WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.